UK to miss out on shale gas revolution says IEA economist

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Guy Bentley

Shale gas will not herald an energy revolution in the UK in the same way it has in the US, according to chief economist and director of global energy economics at the International Energy Agency (IEA).

In remarks that may temper the enthusiasm of shale gas supporters, Fatih Birol told the Daily Telegraph:

The UK has significant shale gas resources but people shouldn't expect a US scale energy revolution in the UK.

The economics are not as favourable as in the US.

Mr Birol said the UK should consider building more nuclear power plants as a longer term alternative to perpetually relying on oil and gas. "Nuclear could have a more positive role to play in the UK," he said.

The cost of energy has become a central political issue in the wake of Ed Miliband's commitment to freeze energy prices for 20-months should Labour win the next election. However, attempts to centrally plan prices got short shrift from the IEA economist, "energy prices should reflect the market value" he said.

In recent months the government has made considerable moves to incentivise the exploration and production of shale gas. Taxes on shale companies production profits are to be slashed from 62 per cent to 32 per cent.

Councils will also be able to keep 100 per cent of the business rates they collect from shale gas sites - double the current 50 per cent figure.

Although Mr Birol's remarks will come as a disappointment to shale gas advocates there remains a strong case for the UK to embrace a dash for gas.

The British Geological Survey (BGS) has estimated there is enough domestic shale gas to supply Britain's power needs for next 40 years, with as much as 1,300 trillion cubic feet of shale gas lying beneath Lancashire's Bowland basin alone.

The new industry could prove a golden opportunity to provide much needed employment in the UK's economically deprived regions. A report from the Institute of Directors concluded that shale gas could create as many as 74,000 jobs, with investment peaking at £3.7bn a year.

Shale gas also has the potential to slash the UK's gas imports from 76 per cent to 37 per cent by 2030.